19 April 2007

Don't Ever Say You Were Not Warned

President Reagan changed the course of government dependency in the US--for about 20 years. But now, built-in growth in entitlement programs for senior citizens, added to other self-incrementing entitlement programs, means that more US citizens are dependent on government programs than not.
Looking at the big picture, especially entitlements for older Americans, some experts worry about a fiscal undertow.

"I fear that we may be on the path to becoming a decrepit, high-unemployment welfare state," says Daniel Mitchell, an economist at the libertarian Cato Institute in Washington. Economists differ regarding whether, or at what level, a high tax burden acts to dampen economic growth. European nations have shown, for example, that advanced economies can maintain generous social-welfare programs.

But Mr. Mitchell says these nations pay a price of more tepid growth. Sweden, he says, has in recent years dropped off the global Top 10 list for per-capita output. Ireland, by contrast, has kept the government burden low and enjoyed rapid economic growth.

The higher the number of citizens dependent on government for income, the higher the tax burden for workers and businesspersons who actually produce something. The higher the tax burden, the lower the incentive to work and produce in the open market--as opposed to the black or grey markets, where income and profits are concealed from the taxman.

While government dependent citizens constituted 55% of the populace when President Reagan took over in 1981, current demographic changes in the US population combined with the built-in budgetary adjustments of entitlement programs, means that the tax burden and regulatory burden for workers and businesspersons in the US will only become more onerous. That means that economic growth cannot help but slow, in the absence of major new technological breakthroughs. Big breakthroughs might signal the opening of a new economic frontier--which would provide new impetus for economic growth for a while (like the telecom/tech boom in the 1990s).

Will this malignant growth of government mean a new dark ages in North America? Many persons believed such a thing to be inevitable back when Jimmy Carter was President of the US. But Ronald Reagan's radical cutting of the size of government reversed the descent, temporarily. (as Margaret Thatcher did in the UK)

A repeat of the Reagan renaissance is unlikely. The increased government dependency, as well as a huge influx of new residents from the third world where there are no traditions of "rule of law", suggests that most citizens will continue to elect representatives that believe in continued growth of government--like Nancy Pelosi, Charles Schumer, and others of their type.

So what should you do, if you want to shield yourself from the likely collapse of economic freedom with all its associated fallout? First, you need to do whatever you can to slow the deadly descent into the stagnant mire of the nanny state. Work to elect officials who are decidedly unenthusiastic about government growth. Work to see that these officials, once elected, resist the temptation to buy votes with government spending. Encourage and support private and volunteer efforts that work outside government funding agencies.

Failing all that, if you know of a country with a majority of citizens who believe in hard work and private enterprise, you might want to look into emigrating. You may want to look at all the US states or Canadian provinces, to find places with greater degrees of local economic freedom. You may be forced into learning how to hide your income and your wealth from an intrusive government. You may have to learn to protect yourself, your family, and your livelihood, independent of government. Worse things could happen, than being relatively independent of big government.

Don't say your weren't warned.

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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